Manufacturing in China, does it still the best Option?

By
Jesus David Cano Romano
September 21, 2015

Now days the globalisation phenomena has made the world smaller, diminishing distances between economies and easing the process of manufacturing overseas, when speaking about the best destination of where to outsource manufacture bunch of reliable options pop out: China, Malaysia, Singapore, Japan, Taiwan, United States, Brasil, Colombia, Equator, Mexico, Iran, Korea and Vietnam just to name a few, each and all of them offering different standards and specialized in different goods under ODM standards targeting local and regional markets.

During the last couple of decades the world has looked to Asia as the manufacturing hub of the world, specially China, that has converted into the world’s factory, hosting the majority of the world’s manufacturing facilities, majority of which are highly specialized, in different products an quality levels.

Now days manufacturing in China means infinite possibilities of manufacture.

In the last couple of months we’ve been hearing everywhere in media about the slowdown of China, let’s bring some facts about it,

In 2014 for first time after almost three decades of massive growth the Chinese Economy grew at 7%, turning up the red lights of the world’s Economy.

In the same year China’s President Xi JinPing mentioned that China was entering into a New Normal in the economy, and this term has become more and more popular all over the media related to China’s Economic Performance.

Even China’s PM Li Ke Qiang in his various speeches in different summits and forums has mentioned that China is transforming and reconverting itself adapting to a New Normal. But what does a New normal means,

The slowdown in China’s growth is a synonym that its economy is getting mature; China’s economic growth was mainly driven by exports and mass production, but for adapting to this new normal the country’s policy makers are trying switch the engine of growth towards a one based on internal consumption and services. Now being mentioned this, does Manufacturing in China still the best option?

China’s Policy makers are aware of this turn in the manufacturing and economic growth paths so early this year Chinese officials have responded in the only way they know. In May the State Council, China’s ruling body, approved “Made in China 2025”, a costly scheme that will use mandates, subsidies and other methods to persuade manufacturers to upgrade their factories. The plan is for China to become a green and innovative “world manufacturing power” by 2025.

China is already the world’s largest manufacturer, accounting for nearly a quarter of global value added in this sector. Research by Morris Cohen of the Wharton Business School finds that the country leads in many industries and that “reshoring to the developed economies is not happening on a large scale.” Even though some production is moving to countries nearer its consumers, China remains at the heart of a network known as Factory Asia. It has an excellent infrastructure and an enormous, hard-working and skilled workforce. Though wages are rising, its labour productivity is far higher than that of India, Vietnam and other rivals, and is forecast to keep growing at 6-7% a year to 2025.

Michael McNamara, the boss of Flex, a big American contract manufacturer, on an interview for The Economist said product cycles have become much faster. Factories in China used to serve export markets, but are now reorganising to concentrate on the booming local market. They are sensibly investing in automation, worker training and new methods. In the process, he says, China is “moving from work engine of the world to genuine innovator”.

China is the world’s largest market for industrial automation and robots. Ulrich Spiesshofer, chief executive of ABB, a Swiss engineering giant, reckons that the latest robots “elevate the nature of work” because they improve safety and eliminate the need for heavy lifting. ABB’s local engineers developed China Dragon, a robot made specifically for the computer industry, which sells well globally. In many industries China is still learning from the world, say the engineers, but its electronics manufacturing is so advanced that “the world is learning from China.”

Staying ahead of the game allows manufacturers to keep their best clients. Nike, a global sportswear firm, has seen a lot of its suppliers decamp to cheaper Vietnam, but still gets 30% of its components from the mainland. Eric Sprunk, its chief operating officer, looks for suppliers capable of developing novel techniques that can inspire new products.

China’s state planners also want to help companies leapfrog to the forefront of technology. Their plan involves policies to encourage the adoption of robotics, 3D printing and other advanced techniques. But factories will invest in advanced kit only if it makes commercial sense.

It’s clear that Manufacturing in China is reconverting, and evolving as it ha been doing for the last 30 years, although, none of the surrounding countries can beat China Manufacturing not only speaking on prices (which in some countries like India or Bangladesh are significantly lower but represent other issues such as forced labour, or lame quality), but also on manufacturing expertise, maturity of the Supply Chain, Connectivity and many other competitive advantages that Manufacturing in China represents and will still represent in the upcoming future.